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NFC Accelerates Toward Its Roadblock

Matthew Talbot, SAPDate Posted: Tuesday, June 12, 2012

We’ve heard a number of announcements lately about new mobile near-field communication (NFC) devices. In April, someone leaked news about the Nokia Lumia 610 NFC, the company’s first NFC phone, due out in early Q3. The same month, Barclaycard announced PayTag, an NFC sticker UK consumers can attach to the back of their current phones, which doesn’t add NFC capability to the handset, but does enable consumers to tap their mobile, rather than a credit card, to pay.

At the same time, there are a lot of opportunities in the market right now for creating the ecosystem for mobile NFC, in the form of requests-for-proposals from banks, mobile operators and other third parties.

The mobile NFC market is obviously starting to accelerate, but it still struggles with the same fundamental issues. Predominantly, those revolve around where the secure element (SE) will lie, and who will own and control it. If the SE is going to be secured on the SIM card, the mostly likely choice is that the MNO will control it. If SE is built into the device itself, or memory card or other add on, that would open up the ecosystem to other players. At the end of the day, the only easier way to create the NFC ecosystem is for banks, MNOs, and handset manufactures to cooperate, and work out how to manage the secure element in all phones. As we know, however, this is unlikely

Because of this stumbling block, we’re still years away from having a widespread NFC payment ecosystem. Industry leaders seem to agree, as 81 percent of those we asked at Mobile World Congress earlier this year said they thought NFC would not emerge as a driver for mass adoption of mobile payments for another two-to-five years. Consumers aren’t queuing up for it either: out of more than six billion mobile devices in the world, only around 40 million (or 0.0067 percent) have NFC capability.

It can be frustrating to know that we have the technology for NFC, just not the business model. A few enterprising souls among us are forging ahead, using the tools they have to figure out their own contactless payment methods, from gluing their entire contactless credit cards to the backs of their phones, or removing the RFID chip from the cards using acetone and gluing it to something else—even fashioning bracelets out of the chips and wire as in this story.

Maybe in less than the time it takes banks, operators and other players to agree on who controls what, we’ll be onto the next technology, and it won’t have the same issues. Two to five years is long time in the mobile payments industry.